Youth loan programme

Federal cabinet in its meeting on Tuesday approved “Kamyab Jawan Programme” worth Rs. 100 billion. Initially each unemployed youth shall be provided a loan of Rs.1 million for setting up business and the loan ceiling shall be increased to Rs. 5 million. This recipe of political gimmick of presenting old wine in new bottle has been the favourite strategy of statisque political parties to hoodwink public opinion from the chronic issue of unemployment. Former Prime Minister Nawaz Sharif had applied this failed recipe in his first and last tenures of governments. In the last tenure he made his political heir Maryam Nawaz in-charge of youth loan programme.

The history of youth loan programmes is replete with failures, humiliating and disastrous consequences for the loan takers and their guarantors. In the past Small Business Finance Corporation used to give small loans of Rs. 100000  on the surety of two government officer guarantors in BS-17 and above when the exchange value of the US dollar was below Rs. 50 and economic environment for small business was friendly. Most of the loan taking youth and their guarantors then faced arrest warrants because of default of loans.

In the first tenure of government of Nawaz Sharif loan programme was floated for small businessmen which proved to be non-starter because of high interest rate and condition of collaterals for availing loan and its repayment schedule in instalments. Likewise, youth loan programme was launched in the previous PML-N government for which separate counters were established in the branches of National Bank. Although the rate of interest on bank loans was almost half of the current one but even then it did not attract the youth because of extremely unfriendly business environment and tough conditions for availing the loan facility. Is the Prime Minister not aware of the lack of interest of youth in youth loan programme of the previous government? The interest rate has been increased to 12.25 percent in monetary policy announced by the State Bank of Pakistan the other day. The compound interest rate plus insurance charges and other overheads will push the interest rate on bank loans of “Kamyab Jawan Programme” about 20 percent. In simple mathematics a loan taker of Rs.1 million will be required to return Rs. 2.5 million provided his business make profit and he is able to regularly pay the installments.

Briefing the media, Special Assistant to the Prime Minister on Information and Broadcasting Dr. Firduos Asiq Awan interpreted the rational of youth loan programme as the best tool for the productive use of human capital. One wishes the Prime Minister should have read the theory of capital formation propounded by the famous economist Ragnar Nurkse which is more relevant to developing countries like Pakistan. The theory tells how the vicious circle of poverty and rampant unemployment can be broken by providing direct employment to youth in mega projects of Public Sector Development Programme. One wishes he must have read the master-piece book by Development Economist Gunnar Myrdal, titled the Asian Drama: An Inquiry into Poverty of Nations. The ruling leadership of Asian Tigers learnt lesson from the works of these economists and achieved economic prosperity for their nations by investing in knowledge economy, creating employment opportunities by launching productive public sector projects and creating favourable economic environment for direct investment both foreign and domestic. Political gimmicks are no substitute for models of economic growth that Pakistan direly needs and which was applied for economic development of the country in the decade of 1960s.